Jobless Claims Surge More Than Expected to 26-Year High

New jobless claims jumped far more than expected last week in an already dismal labor market, and there's no relief in sight for workers as mass layoffs persist.

The Labor Department reported Thursday that the number of newly jobless workers seeking benefits rose last week to a seasonally adjusted 626,000, from the previous week's upwardly revised figure of 591,000. The latest total is far more than analysts' expectations of 583,000.

That's also the highest since October 1982, when the economy was in a steep recession, though the work force has grown by about half since then.

The numbers reflect the large spate of layoffs announced last month by companies from all sectors of the economy, including Caterpillar Inc., Pfizer Inc. and Microsoft Corp. The layoffs continued Thursday with cosmetics maker Estee Lauder Cos. saying its fiscal second-quarter profit fell 30 percent and it plans to begin a four-year restructuring plan that will include cutting 2,000 staffers, or 6 percent of the work force. The company will also continue its hiring freeze.

Economists expect the government to issue a grim report Friday that will show the unemployment rate rose to 7.5 percent in January, up from 7.2 percent in December. That would be the highest rate in 17 years.

The housing slump and financial crisis have hammered spending by businesses and consumers, sending the economy into a recession that is expected to continue until at least the second half of this year.

The recession's impact was visible in other economic data Thursday. Factory orders fell by 3.9 percent in December, the Commerce Department said, a record fifth straight drop.

For all of 2008, orders for everything from autos to computers to food rose by only 0.4 percent, the weakest showing since orders actually fell by 1.8 percent in 2002.

Meanwhile, many retailers reported dismal January sales. The malaise crossed the spectrum of retailing, from department store chains to teen clothing chains.

Laid-off workers are having a harder time landing new jobs as companies impose hiring freezes in addition to job cuts.

The number of people that remained on the unemployment compensation rolls increased slightly to nearly 4.8 million, the Labor Department said, most since records began in 1967. The continuing claims data lags the number of new claims by one week.

As a proportion of the work force, the number of people receiving unemployment benefits is at the highest level since August 1982. But that doesn't include an additional 1.7 million people receiving unemployment insurance through an extension of benefits Congress approved last year, which brings the total to about 6.5 million.

The extension provides up to 33 additional weeks of benefits, on top of the 26 weeks typically provided by states.

The Labor Department said in a separate report that productivity rose at an annual rate of 3.2 percent in the final three months of last year, far above the 1.1 percent rise that economists had expected.

Productivity, which is the amount of output per hour of work, jumped because the number of hours worked during the period plunged faster than output declined. That reflected the massive wave of layoffs that occurred during the fourth quarter.

Unit labor costs, meanwhile, edged up at a 1.8 percent annual rate, far lower than the 2.9 percent rise that had been forecast. The results underscored how the deepening recession has removed the threat of inflation.

But more mass layoffs were announced this week. On Wednesday, Botox maker Allergan Inc. and Time Warner Inc.'s cable division announced large job cuts. A day earlier, PNC Financial Services Group, airplane maker Hawker Beechcraft Corp., Liz Claiborne Inc., King Pharmaceuticals Inc. and aerospace company Rockwell Collins Inc. announced layoffs. General Motors Corp., meanwhile, said it will offer buyouts to all of its hourly workers.